The Scotts Company: Transforming the European Supply Chain
Company background
The Scotts Company started selling hardware and seeds in Marysville, Ohio in 1868. It specializes in seeds, fertilizers, peat, potting soils and other organic materials. By 1995, Scotts was the world’s #1 marketer of lawn and garden products. European operations were launched in 1993, with HQ in Lyon, France, and additional five European businesses acquired in UK, France, Germany, Austria and Benelux. Symptoms and problems
The main symptom and concern is that Scotts’ European sales had increased as expected, but margins had dropped, as well as synergies between the acquired companies were not working as expected. In addition, one of Scotts Europe’s largest customers was threatening to leave due to unacceptable service levels that might cause a domino effect to other large customers.
The main problem is fundamentally related to supply chain problems, including duplication and inefficiency of sourcing, manufacturing and distribution. Therefore, task #1 is to optimize supply chain and squeeze costs.
We would like to elaborate more on sub problems and causes:
1. Each office has their own supply management function that increases Group’s purchasing, manufacturing, packaging and delivering costs. Scotts Europe has hundreds of suppliers, numerous uncoordinated contacts, even several contacts with the same supplier, but with the different pricing.
2. Products are not standardized and vary by country in terms of type, packaging and specification. This increases production time, production costs, lead time and errors. And moreover, 4% of SKUs appear to be virtually inactive.
3. Every European office has own accounting practice, which leads to incomparability of data. Furthermore, IT systems are not integrated in any way. There is no united system of forecasting and measurement, which leads to errors, excessive inventories or inventory shortages. Bad IT management is also the reason for not reliable order fillings.
4. Each European
The Scotts Company started selling hardware and seeds in Marysville, Ohio in 1868. It specializes in seeds, fertilizers, peat, potting soils and other organic materials. By 1995, Scotts was the world’s #1 marketer of lawn and garden products. European operations were launched in 1993, with HQ in Lyon, France, and additional five European businesses acquired in UK, France, Germany, Austria and Benelux. Symptoms and problems
The main symptom and concern is that Scotts’ European sales had increased as expected, but margins had dropped, as well as synergies between the acquired companies were not working as expected. In addition, one of Scotts Europe’s largest customers was threatening to leave due to unacceptable service levels that might cause a domino effect to other large customers.
The main problem is fundamentally related to supply chain problems, including duplication and inefficiency of sourcing, manufacturing and distribution. Therefore, task #1 is to optimize supply chain and squeeze costs.
We would like to elaborate more on sub problems and causes:
1. Each office has their own supply management function that increases Group’s purchasing, manufacturing, packaging and delivering costs. Scotts Europe has hundreds of suppliers, numerous uncoordinated contacts, even several contacts with the same supplier, but with the different pricing.
2. Products are not standardized and vary by country in terms of type, packaging and specification. This increases production time, production costs, lead time and errors. And moreover, 4% of SKUs appear to be virtually inactive.
3. Every European office has own accounting practice, which leads to incomparability of data. Furthermore, IT systems are not integrated in any way. There is no united system of forecasting and measurement, which leads to errors, excessive inventories or inventory shortages. Bad IT management is also the reason for not reliable order fillings.
4. Each European